British Westinghouse v Electric Railways

British Westinghouse Electric Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673

Supply of defective turbines; relevance of profit accruing from acts done in mitigation

Facts

Underground Electric Railways (UER) purchased turbines from British Westinghouse Electric Co (BWEC). The turbines were faulty in that they were deficient in power. UER used the defective turbines for a time and then purchased new turbines which were more efficient than the defective ones would have been even if they had not been faulty. UER brought an action for breach of contract.

Issues

UER claimed the cost of the replacement turbines. They asserted the purchase was reasonable and prudent and, therefore, the cost of purchasing them should be recoverable as a direct consequence of the breach. Additional profits made from purchasing the new turbines was not a matter for consideration when assessing damages. BWEC contended that even if the turbines had not been defective, the more efficient turbines would have been purchased in any event and, therefore, UER had not suffered a material loss because of the defect. Damages awarded are to place the innocent party in the position he would have been had there been no breach. Even if the new turbines were purchased because of the breach, account should be taken of the increased profits made with the installation of the more energy efficient turbines.

Decision/Outcome

UER could not claim for the cost of the new turbines. Damages for breach of contract were to place the injured party so far as possible in the position they would have been had the contract been performed. Any additional profits made because of acts done in mitigation should be considered when quantifying damages. The savings made by using the new turbines exceeded the cost of the old turbines and as damages were a question of fact, the cost of the new turbines were not recoverable.